In 2007, Donald Graham declared the Washington
Post Company “an education and media company.” The Post chairman was
acknowledging that his company’s Kaplan education division was bringing in
more revenue than its iconic newspaper and various TV
holdings.

Now Kaplan is in deep distress, and the Post Company has
unexpectedly bought the hospice firm Celtic Healthcare—a foray into a
field that no one ever imagined the company entering. Will Graham announce
one day that the Post is a health-care company, too? Does the brand-name
newspaper, bleeding revenues, still fit into a company that includes cable
television, six local TV stations, two social-media start-ups, and a
sprawling international education division?

Breaking up the company and selling the paper “is one thing
investors have been calling for for a while,” says Liang Fengof the investment research firm Morningstar, one of the few
analysts who follow the Post Company. “Investors and Mr. Graham are in
different places.”

Company stock once sold for close to $1,000 a share; now it’s
hovering at $360, where it was back in 1997.

The newspaper-publishing division—which includes papers,
digital platforms, and the online magazine Slate—reported a $38.4-million
operating loss for the first six months of the year.

Will Don Graham ever divest the company of the newspaper he
inherited from his mother?

“He has majority control,” says Feng, who believes the Post
Company is undervalued. “He’s made it very clear he will keep the business
together for a long time.”

Even with losses in education and newspapering, the company’s
profits rose by 14 percent in the second quarter, thanks in large part to
a 43-percent boost in operating income from its television stations,
fattened by election-year political ads. And though the Post Company
remains in relatively good shape, Kaplan is less of a shining
star.

The Graham family placed its bet on Kaplan in 1984, when it
bought the test-prep firm and expanded it aggressively into higher
education. Kaplan began bringing in revenues at rapidly growing rates. As
the newspaper lost readers, ads, and profits, Kaplan propped up Post
Company balance sheets. But in recent years, government investigators
found that Kaplan and other for-profit colleges were overselling their
programs and leaving students in debt, mostly for federal student
loans.

Students fled, and Kaplan tightened its standards. Operating
income for the Post Company’s education division plummeted by 84 percent
between the second quarter of 2011 and the second quarter of this year. In
the first six months of 2011, it recorded income of $42 million; in the
first six months of this year, it lost nearly $10 million.

Graham vowed to reform the schools and went on bended knee to
Capitol Hill to soften federal regulations. Still, Kaplan continues to
shrink in size and profits. In late September, the Post Company announced
that Kaplan was closing nine and merging four higher-education campuses.
The company gave no reason, but an accreditation commission had warned
that some campuses were falling short.

Then this fall, Graham said the Post was buying a majority
stake in Celtic, a midsize firm that provides hospice and home health care
in Pennsylvania and Maryland.

“It kind of came out of nowhere,” Feng says.

It appears the Graham family wants to find a new Kaplan-like
golden goose that will keep profits growing as the media industry
continues to shift. With millions of baby boomers aging into retirement
homes and—eventually—hospice care, the industry appears to be at a growth
point, as Kaplan was decades ago.

Graham might be looking to boost profits so his board of
directors won’t pressure him to sell the newspaper, as the board did withNewsweek, whose revenue collapsed before its fire sale toSidney Harman. After a merger with Barry Diller’sonline Daily Beast, the once-vaunted newsweekly appears headed
soon to that great recycling bin in the sky.